Kirtsaeng and Price Discrimination

We all know John Wiley & Sons Inc.: textbooks. A bright Thai student studying at Cal saw what is taught in every good principles of economics class, that a price discriminator cannot succeed if the person who buys at a lower price can sell to someone who wants the good, but is only being offered, directly, a higher price. The Thai student is named Mr Kirtsaeng, and he sold Wiley textbooks first sold in Thailand in the United States for a substantial profit.

Different prices is the issue.


Wiley, like any good profit maximizer, claimed that Kirtsaeng’s importation and resale of the books was an infringement of the company’s exclusive right to distribute its copyrighted works under §106(3) of the Copyright Act. Wiley also asserted the Copyright Act’s import provision under §602.

The economic issue is simple: should copyright law give the copyright owner the right to price discrimination, which means, of course, more profits. The legal issue is a little more complex. 

The First Sale Doctrine was the obvious response, but the district court prohibited the student from raising the defense, rejecting its applicability to goods manufactured abroad.  The jury found Kirtsaeng liable for willful copyright infringement and awarded Wiley statutory damages of more than half a million dollars.

Luckily, Mr Kirtsaeng appealed. The Supreme Court noted that §602(a)(1) of the Copyright Act makes it clear that importing a copy of a work without permission violates the copyright owner’s exclusive distribution right under §106(3) of the Copyright Act.  But, there is that testy First Sale Doctrine also.

The First Sale Doctrine (17 U.S.C. § 109) provides that an individual who knowingly purchases a copy of a copyrighted work from the copyright holder receives the right to sell, display, or otherwise dispose of that particular copy. So, can one reconcile the First Sale Doctrine with the Import Restriction?

The big problem for the Supreme Court was Quality King Distributors v. L’anza Research International. There, the Supreme Court held that the first sale doctrine limited the scope of §602(a). A foreign distributor who re-imported copyrighted works, made in the US, could assert the first sale doctrine as a defense. The Quality King Court did not rule on whether the first sale doctrine would apply to works manufactured outside of the United States.

Wait. Quality King is about hair products, or, more specifically, their labels. The book case is  the first Supreme Court case about the first sale doctrine. That case involved a claim by a publisher that the resale of its books at discounted prices infringed its copyright on the books. Bobbs-Merrill Co. v. Straus, 210 U. S. 339 (1908). Bobbs-Merrill had inserted a notice in its books that any retail sale at a price under $1 would constitute an infringement of its copyright. The defendants, who owned Macy's department store, disregarded the notice and sold the books at a lower price without Bobbs-Merrill's consent. The Supreme Court said that the exclusive statutory right to "vend" applied only to the first sale of the copyrighted work:

"What does the statute mean in granting 'the sole right of vending the same'? Was it intended to create a right which would permit the holder of the copyright to fasten, by notice in a book or upon one of the articles mentioned within the statute, a restriction upon the subsequent alienation of the subject-matter of copyright after the owner had parted with the title to one who had acquired full dominion over it and had given a satisfactory price for it? It is not denied that one who has sold a copyrighted article, without restriction, has parted with all right to control the sale of it. The purchaser of a book, once sold by authority of the owner of the copyright, may sell it again, although he could not publish a new edition of it.

 Sell a book, and the owner of the copyright has lost control of its resale. Hair products? Well, they can have a copyright label. And their is that pesky import restriction.

The  Quality King went to the statute itself. It noted that the most relevant portion of § 602(a) provides:

"Importation into the United States, without the authority of the owner of copyright under this title, of copies or phonorecords of a work that have been acquired outside the United States is an infringement of the exclusive right to distribute copies or phonorecords under section 106, actionable under section 501. ... "

It refers to section 106. The Court explaints: "After the first sale of a copyrighted item "lawfully made under this title," any subsequent purchaser, whether from a domestic or from a foreign reseller, is obviously an "owner" of that item. Read literally, § 109(a) unambiguously states that such an owner "is entitled, without the authority of the copyright owner, to sell" that item. Moreover, since § 602(a) merely provides that unauthorized importation is an infringement of an exclusive right "under section 106," and since that limited right does not encompass resales by lawful owners, the literal text of § 602(a) is simply inapplicable to both domestic and foreign owners of L'anza's products who decide to import them and resell them in the United States.'

Solved. But, what about textbooks, produced abroad? In Kirtsaeng, the Court notes that the location of the manufacture of the copyrighted work is critical when interpreting §109(a) because the codification applies the first sale doctrine to a particular copy “lawfully made under this title.”  The Court concluds that the statute should be read to favor a non-geographical interpretation, and that “lawfully made under this title” means “in accordance with” or “in compliance with” the Copyright Act, and rejects the argument that the language applies to works made “in territories in which the Copyright Act is law.” First Sale rules, it seems.


And copyright owners cannot squeeze more profits.

Downloading 24 songs costs $220,000, which is quite a bit for music. The threat of a significant award under the copyright statute for illegal downloading is real. $9,250 per work was the award in the below Minnesota case, where the defendant replaced her hard drive and denied downloading, but was not believed. She also had written a college paper on the legality of Napster. That was in a first trial. In a second, the jury wanted to award $80,000 per tune. The Court said verdict two was too much, and instead remitted damages to $2,250 per work, for a total of $54,000, on the ground that the jury’s award was “shocking.” The recording companies declined the remitted award and exercised their right to a new trial on damages. Third time is a charm, and $62,500 per song was the new number. In every way, she undercut a plea to be an "innocent" in the matter. But, Ms Thomas-Rasset was left with an appellate case about the constitutionality of the copyright statutory award.

Here is the Thomas-Rasset case: Capitol v Thomas-Rasset.


There were three trials and an appeal. Most interestingly, upon the Court's insistence, the parties filed
supplemental briefs in which the recording companies defended the court’sinstruction and Thomas-Rasset argued that the court erred when it instructed the juryon the “making available” issue. After a hearing, the district court granted Thomas-Rasset’s motion for a new trial on this alternative ground, holding that making a work available to the public is not “distribution” under 17 U.S.C. § 106(3). The issue whether making copyrighted works available to the public is a right protected by § 106(3) has divided the district courts. Compare, e.g., Atl. Recording Corp. v. Howell, 554 F. Supp. 2d 976, 981-84 (D. Ariz. 2008), and London-Sire Records v. Doe 1, 542 F. Supp. 2d 153, 176 (D. Mass. 2008), with Motown Record Co. v.DePietro, No. 04-CV-2246, 2007 WL 576284, at *3 (E.D. Pa. Feb. 16, 2007), and Warner Bros. Records, Inc., v. Payne, No. W-06-CA-051, (W.D. Tex. July 17, 2006).

 The district court, relying in part on the now-vacated decision in Sony BMG Music Entm’t v.
Tenenbaum, 721 F. Supp. 2d 85 (D. Mass. 2010), vacated in relevant part by, 660 F.3d 487 (1st Cir. 2011), granted Thomas-Rasset’s motion and reduced the award to $2,250 per work, for a total of $54,000. The court ruled that this amount was the maximum award permitted by the Due Process Clause.

The Eighth Circuit relied on the old Supreme Court Case, saying that " The Supreme Court long ago declared that damages awarded pursuant to a statute violate due process only if they are “so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.” St. Louis, I.M. & S. Ry. Co. v. Williams, 251 U.S. 63, 67 (1919). Under this standard, Congress possesses a
“wide latitude of discretion” in setting statutory damages. Id. at 66. Williams is still good law, and the district court was correct to apply it." The record companies choose the first, and smallest verdict.

Tannenbaum Down for the Count?

In 2007, graduate student Joel Tenenbaum was sued for downloading and distributing 30 songs using file-sharing services like Napster, Morpheus, Kazaa and LimeWire. After his five days in court with a jury of his peers, he was found to have infringed the copyrights in the 30 songs. The result? Statutory damages of $22,500 for each song. Pow.

Now, this case is famous because Charles Nesson, law professor, used this case to question the constitutionality of copyright damages. The judge, Nancy Gertner, bought the argument, and, finding the award unconstitutionally excessive, reducing the award to $67,500. When there is a principle to fight, that fight usually happens, and here it did. Tenenbaum moved for a new trial or remittitur, arguing that the court should remit the award to the statutory minimum because its excessiveness both offended due process and merited common law remittitur. Judge Gertner bypassed the issue of common law remittitur, and reduced the jury award by a factor of ten on the basis that the award was unconstitutionally excessive under the standard for evaluating punitive damage awards enumerated in BMV v. Gore, 517 U.S. 559 (1996).

On to appeals. The First Circuit appeals court found Professor Nesson's attempt to change copyright unpersuasive, and reinstated the jury award of $675,000 on procedural grounds. It rejected the argument that copyright damages statute "was unconstitutional under Feltner [v. Columbia Pictures Television, Inc., 523 U.S. 340(1998)], that the Act exempts so-called ‘consumer copying’ infringement from liability and damages, that statutory damages under the Act are unavailable without a showing of actual harm, that the jury’s instructions were in error, and his various trial error claims.” The First Circuit left the door open for Judge Gertner, saying that, although her ruling on constitutionality was incorrect, she should consider common law remittitur. Remitittur is the power of the judge in a civil case to reduce or eliminate of jury's damage award. Remittitur is appropriate only if the award exceeds “any rational appraisal or estimate of the damages that could be based on the evidence before the jury,” where such evidence is reviewed in the light most favorable to the prevailing party.

Now, litigation takes turns unplanned by the best litigators. Here, Professor Nesson lost Judge Gertner when the case was sent back to district court. She retired. The new judge assigned to the case, Judge Rya Zobel, was less sympathetic. The Gore standards, it seems, do not apply in a statutory setting. Another Supreme Course case does, the Williams case does, and that says to defer to Congress in setting damages.

Where now, Professor Nesson?

 Tenenbaum Decision re: Gore or Williams?

Protect Your Business Work Product: Copyright

USI MidAtlantic, Inc. suffered a $22.5 million judgment for copyright infringement from competitor. A former employee of the competitor joined MidAtlantic and supplied them with binders of information about insurance products created by his former employer. Most lawyers would look to confidentiality agreements and trade secrets, but Graham, the competitor, had done something even better: they copyrighted the material. When MidAtlantic copied language from the binders into over 800 client proposals, they were found to indirectly infringe the copyrights.Graham recovered profits attributable to USI MidAtlantic's infringement, plus prejudgment interest.

The lesson? Copyright can be used to protect business work product. The plaintiff proved lost profits: their task may have been easier if they had promptly registered their copyrights.

The big legal issue in the case how far back can copyright damages go? Three years is the statute of limitations. The issue is, though, whether the statute of limitation runs three years from discovery or from when the claim "accrued," e.g. "occurred." Under the injury rule, a claim accrues, and the statute of limitations begins to run, when the plaintiff suffers the injury. If the discovery rule applies, the claim arises when the plaintiff discovers, or with reasonable diligence should have discovered, the injury. The difference: in this case the shorter limit resulted in $2 million in damages, the longer $20 million.

The Third Circuit went with the Discovery Rule. "Although we have not previously addressed this issue, eight of our sister courts of appeals have applied the discovery rule to civil actions under the Copyright Act. See Warren Freedenfeld Assocs., Inc. v. McTigue, 531 F.3d 38, 44-46 (1st Cir.2008);  Comcast v. Multi-Vision Elecs., Inc., 491 F.3d 938, 944 (8th Cir.2007);  Roger Miller Music, Inc. v. Sony/ATV Publ'g, LLC, 477 F.3d 383, 390 (6th Cir.2007);  Polar Bear Prods., Inc. v. Timex Corp., 384 F.3d 700, 705-07 (9th Cir.2004);  Gaiman v. McFarlane, 360 F.3d 644, 653 (7th Cir.2004);  Lyons P'ship, L.P. v. Morris Costumes, Inc., 243 F.3d 789, 796 (4th Cir.2001);  Daboub v. Gibbons, 42 F.3d 285, 291 (5th Cir.1995);  Stone v. Williams, 970 F.2d 1043, 1048 (2d Cir.1992)."

Defense, it seems, often relies on some shred of hope in some case somewhere. On this issue, it is a New York District Court case that gives copyright defendants hope to limit the limitations to accrual. Auscape Int'l v. Nat'l Geographic Soc'y, 409 F.Supp.2d 235, 247 (S.D.N.Y.2004). And defendants want to broaden a Supreme Court case on FCRA statute of limitations to copyright. TRW Inc. v. Andrews, 534 U.S. 19, 122 S.Ct. 441, 151 L.Ed.2d 339 (2001). That dog, it seems, won't hunt.

Here is the Third Circuit case: WILLIAM GRAHAM COMPANY v. HAUGHEY USI

CD's? CD's still exist? The law tries to catch up . . .

The trouble with technology and the law is that technology moves fast; the law does not.

So, finally a ruling on whether promotional music compact discs can be resold without violating copyright. The answer? Yes, because of the first-sale doctrine. UMG Recordings, Inc. v. Augusto, Case No. 08-55998 (9th Cir., Jan. 4, 2011) (Canby, J.).

UMG Records distributed promotional CDs. They sent them to critics, radio personnel, and others for promotion. Of course, they claimed the cd was only for those to whom they sent them: acceptance of the cd is a license; not for resale; promotional use only; resale or transfer is not allowed and may be punishable under federal and state laws. Very imposing.

I had always wondered, since way back in the day, when a local general manager of a Fort Wayne tv/radio empire gave me a new Iggy Pop album sent to them for promotion, whether I had been the unwitting recipient of a copyright violation or some kind of crime. Cal wasn't worried; but, I never wanted to risk my neck for Iggy Pop.

The question is answered. Despite the warning of the Dire Wolf on the recordings sent, unsolicited and for free, we need not beg "don't murder me record company, please don't murder me," although Mr Augusto was dragged to the Ninth Circuit. His sin? Ebay.

The district court granted Augusto summary judgment finding his sale on Ebay of Big Bad Record Company's promotional cd's permissible under the first-sale doctrine. Lawfully acquiring title of a copyrighted work gives one the permission to transfer, sell, or dispose of that work without permission from the copyright owner. That's the first sale doctrine (which says the second sale is not a copyright violation).

The Supreme Court created the first sale doctrine, which is very simple. Once you buy a car, you can resell it at any price. Why should copyright differ? In Bobbs-Merrill Co. v. Straus, 210 U.S. 339 (1908), the Supreme Court said it should not. Describing its own case, the Supreme Court explained: "In that case, the publisher, Bobbs-Merrill, had inserted a notice in its books that any retail sale at a price under $1.00 would constitute an infringement of its copyright. The defendants, who owned Macy’s department store, disregarded the notice and sold the books at a lower price without Bobbs-Merrill’s consent. We held that the exclusive statutory right to vend applied only to the first sale of the copyrighted work..."

The Big Bad Record Company said its distribution of promotional CDs constituted a license and not a “sale,” pointing to its promotional statements on the CDs. But, the first-sale doctrine applies not only to a sale, but also to any transfer after the copyrighted work being placed in the stream of commerce. And, as any contract law 101 would teach, the free, unsolicited distribution did not create a license. And the commentators had explained that "first sale" really means "first transfer:" Although this statutory limitation is commonly referred to as the first sale doctrine, its protection does not require a "sale." The doctrine applies after the "first authorized disposition by which title passes." 2 Nimmer § 8.12[B][1][a]. This passing of title may occur through a transfer by gift. See 4 William F. Patry, Patry on Copyright § 13:15 ("Since the principle [of the first sale doctrine] applies when copies are given away or are otherwise permanently transferred without the accoutrements of a sale, 'exhaustion' is the better description."); 2 Paul Goldstein, Goldstein on Copyright § 7.6.1 n.4 (3d ed.) ("[A] gift of copies or phonorecords will qualify as a 'first sale' to the same extent as an actual sale for consideration.").

Best of all, there is a Unordered Merchandise Statute. Because the discs were unordered merchandise, the recipients were free to “retain, use, discard, or dispose” of them as they saw fit under the Unordered Merchandise Statute." That statute does, indeed, make unordered merchandise a gift. Kudos to the defense lawyers for this research.

The 9th Circuit dismissed the infringement claim. I am safe for receiving Iggy Pop. And future lawyers will try to understand what was a cd . . .

Fees . . fees. . . fees . .

Section 505 of the Copyright Act provides:

In any civil action under this title, the court in its discretion may allow the recovery of full costs by or against any party other than the United States or an officer thereof. Except as otherwise provided by this title, the court may also award a reasonable attorney's fee to the prevailing party as part of the costs.

Seems simple.

The court has two tasks in applying §505: first, deciding whether an award of attorney's fees is appropriate and, second, calculating the amount of the award.

Simple again.

When is an award appropriate? One must be a "prevailing party," meaning that ". . . one has to be awarded some relief by the court. Id. at 603, 121 S.Ct. 1835. The key inquiry is whether some court action has created a “material alteration of the legal relationship of the parties.” Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep't of Health & Human Res., 532 U.S. 598, 604, 121 S.Ct. 1835, 149 L.Ed.2d 855 (2001).

So, once one prevails, the analysis goes on because, even if a plaintiff or defendant "prevails," the Supreme Court in rejected a rule requiring attorneys' fees in copyright infringement cases as a matter of course, instead leaving the question of attorneys fees to the discretion of district courts. Fogerty v. Fantasy, Inc., 510 U.S. 517, 114 S.Ct. 1023, 127 L.Ed.2d 455 (1994). The Supremes ruled that “attorneys' fees are to be awarded to prevailing parties only as a matter of the court's discretion.”).

So, how does a Court determine its discretion? The Ninth Circuit tells the Court to look at factors. Five factors. They are:

(1) the degree of success obtained;
(2) frivolousness;
(3) motivation;
(4) objective unreasonableness (both in the factual and legal arguments in the case); and
(5) the need in particular circumstances to advance considerations of compensation and deterrence.

But, remember: the applicable standard depends on the statute, and Section 505 simply authorizes fee awards to the prevailing party.

Derivative Works Exception

Here is a corner of copyright law: the Derivative Works Exception. 17 U.S.C. §203(b)1), the Derivative Works Exception, presents a defense to a claim of infringement. It provides that a derivative work prepared under the terms of a license “may continue to be utilized under the terms of the [license] after its termination.”



The Supreme Court explained in Mills Music, Inc. v. Snyder, 469 U.S. 153 (1985), that “an entitlement to continue to distribute derivative works under the Derivative Works Exception depends on the terms of the license.” Who's Sorry Now? That is the song which is the subject of the Mills Music case. It's author sold the renewal rights in the song to Mills Music and received an advance and 50% of future revenues on reproductions and a fee on sheet music. The author died, and his estate cancelled the transfer, causing almost all the rights in the copyright to revert to the estate. The exception? Under §304(c)(6)(A), a "derivative work prepared under the authority of the grant before its termination may continue to be utilized under the terms of the grant after its termination." There were many sound recording of "Who's Sorry Now," so the dispute was about who received the continuing royalties from the recordings. The result? Since the recordings had been "prepared under authority of the grant" from the author to petitioner, the terms of the agreement that had been in effect prior to the termination governed the record companies' obligation to pay royalties, and that under those agreements petitioner and respondents were each entitled to a 50 percent share in the net royalty.

What about architectural drawings? In a new case, Architettura licensed its site plans for an apartment complex in Fort Worth to the developer. Ultimately, another architect was chosen. Architettura wanted to be paid for its work, but the developer refused. Architettura claimed infringement. It was undisputed that Architettura owned the work and could revoke any licenses, which it did; but, the Court found that if another firm had used their work while developing the site plan, the new work was a derivative work. And the Plaintiff has a "Who's Sorry Now" problem. They argued that the Derivative Works Exception did not apply to a revocable license of limited duration, as here, but should only be applied to a statutory termination, as in Mills. The Court disagreed.

The lesson? Beware of derivative works if you license a copyright.

Who Gets Attorneys' Fees in Copyright Case?

Failure to register a copyright keeps a copyright plaintiff from obtaining attorneys' fees and statutory damages. One has to register to proceed with litigation; but, registration of a copyright only allows statutory damages and attorneys' fees for infringements occurring after the registration. Section 412 of the Copyright Act provides that registration is a prerequisite for statutory damages and attorneys fees. Statutory damages and attorneys fees are governed by Sections 504 and 505 of the Copyright Act.

John Fogerty of Creedence Clearwater Revival helps us on this issue. He penned "Run Through the Jungle," and then sold its rights to Fantasy, Inc. Later, he penned "The Old Man Down the Road," and Fantasy sued, claiming "Old Man" was the same as "Jungle." A jury said Fantasy was wrong, and that they were different songs. Mr Fogerty, of course, requested attorneys' fees. His request was denied because Fantasy's infringement suit was not brought frivolously or in bad faith as required by the Ninth Circuit for an award of attorney's fees to a successful defendant. The Ninth Circuit standard for awarding attorney's fees treated successful plaintiffs and successful defendants differently. Under that standard, commonly termed the "dual" standard, prevailing plaintiffs were generally awarded attorney's fees as a matter of course, while prevailing defendants had to show that the original suit was frivolous or brought in bad faith.

In contrast, some other circuits followed the so called "evenhanded" approach in which no distinction was made between prevailing plaintiffs and prevailing defendants. The Court of Appeals for the Third Circuit, for example, had ruled that "we do not require bad faith, nor do we mandate an allowance of fees as a concomitant of prevailing in every case, but we do favor an evenhanded approach." Lieb v. Topstone Industries, Inc., 788 F. 2d 151, 156 (CA3 1986).

The Supreme Court took the Fogerty case (Fogerty v. Fantasy, Inc. (92-1750), 510 U.S. 517 (1994)), noting that: "The Copyright Act of 1976, 17 U.S.C. § 505 provides in relevant part that in any copyright infringement action 'the court may . . . award a reasonable attorney's fee to the prevailing party as part of the costs.' The question presented in this case is what standards should inform a court's decision to award attorney's fees to a prevailing defendant in a copyright infringement action--a question that has produced conflicting views in the Courts of Appeals."

It is the general rule in this country that unless Congress provides otherwise, parties are to bear their own attorney's fees. Alyeska Pipeline Co. v. Wilderness Society, 421 U.S. 240, 247-262 (1975). The British rule awards fees to the prevailing party. Looking at the statutory language, which uses the term "may," the Supreme Court ruled that the Copyright Statute adopted neither the American or British rule, or the dual approach rule. Instead, the Fogerty court instructs that "Prevailing plaintiffs and prevailing defendants are to be treated alike, but attorney's fees are to be awarded toprevailing parties only as a matter of the court's discretion. "There is no precise rule or formula for making these determinations," but instead equitable discretion should be exercised "in light of the considerations we have identified." Hensley v. Eckerhart, 461 U.S. 424,436-437 (1983)."

The best summary? The Supreme Court's footnote: "Some courts following the evenhanded standard have suggested several nonexclusive factors to guide courts' discretion. For example, the Third Circuit has listed several nonexclusive factors that courts should consider in making awards of attorney's fees to any prevailing party. These factors include "frivolousness, motivation, objective unreasonableness (both in the factual and in the legal components of the case) and the need in particular circumstances to advance considerations of compensation and deterrence." Lieb v. Topstone Industries, Inc., 788 F. 2d 151, 156 (CA3 1986). We agree that such factors may be used to guide courts' discretion, so long as such factors are faithful to the purposes of the Copyright Act and are applied to prevailing plaintiffs and defendants in an evenhanded manner."

Obama . . . Poster from Picture . . . . Fair Use?

It was a simple photojournalism picture, taken by an AP stringer, when a Los Angeles artist, Shephard Farley, found the image on the web and used it to produce his rendering as a poster:

. The poster has become ubiquitous, and the photo owners (there is a dispute there too about ownership) are now claiming infringement.

This is a great case to think about fair use. If you emphasize the copyright owner's property rights, then you can emphasize the first three factors of the four factor test and rule against fair use. If you emphasize creativity and development of art, then you can emphasize the last factor, through the Posner analysis, and find for fair use.

As you probably know, there are four factors which you look at when determining whether or not something qualifies as a "fair use":
(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
(2) the nature of the copyrighted work;
(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
(4) the effect of the use upon the potential market for or value of the copyrighted work.

Justice Souter, in Campbell v. Acuff-Rose Music (the case dealing with 2 Live Crew's parody of Pretty Woman) weighs in on the purpose of copyright protection:

The first factor in a fair use enquiry is "the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes." § 107(1). This factor draws on Justice Story's formulation, "the nature and objects of the selections made." Folsom v. Marsh, 9 F. Cas., at 348. The enquiry here may be guided by the examples given in the preamble to § 107, looking to whether the use is for criticism, or comment, or news reporting, and the like, see § 107. The central purpose of this investigation is to see, in Justice Story's words, whether the new workmerely "supersede[s] the objects" of the original creation, Folsom v. Marsh, supra, at 348; accord, Harper & Row, supra, at 562 ("supplanting" the original), or instead adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message; it asks, in other words, whether and to what extent the new work is "transformative." Leval 1111. Although such transformative use is not absolutely necessary for a finding of fair use, Sony, supra, at 455, n. 40, [n.11] the goal of copyright, to promote science and the arts, is generally furthered by the creation of transformative works. Such works thus lie at the heart of the fair use doctrine's guarantee of breathing space within the confines of copyright, see, e. g., Sony, supra, at 478-480 (Blackmun, J., dissenting), and the more transformative the new work, the less will be the significance of other factors, like commercialism, that may weigh against a finding of fair use.

In contrast, Judge Posner has viewed fair use from an economic perspective. Judge Posner suggests, in Ty v. Publications, 292 F.3d 512, that:

Generalizing from this example in economic terminology that has become orthodox in fair-use case law, we may say that copying that is complementary to the copyrighted work (in the sense that nails are complements of hammers) is fair use, but copying that is a substitute for the copyrighted work (in the sense that nails are substitutes for pegs or screws), or for derivative works from the copyrighted work, see 4 Melville B. Nimmer & David Nimmer, Nimmer on Copyright § 13.05[B][1], p. 13-193 (2002), is not fair use.

He then goes on to trash the statutory test (and the Campbell formulation) by saying:

We have thus far discussed the application of the fair-use doctrine in terms of the purpose of the doctrine rather than its statutory definition, which though extensive is not illuminating.

I find the Posner approach more convincing. Here, the photo's value was small but for the poster. These are complements, and allowing this transformation benefits both parties and society.

Failure to Register Copyright Before Infringment Cuts Damage Options

Statutory damages and attorneys’ fees under the Copyright Act are not not available for infringement that commenced before registration -- or after the registration. The rule: register or lose statutory damages if infringement occurs before a registration. Period.

In Shade v. Gorman, in the Northern District of California, the Plaintiff conceded that he could not recover statutory damages or fees for any pre-registration infringement. But, he argued that he was entitled to statutory damages and fees for post-registration infringement. Wrong.

Relying on the Ninth Circuit’s recent decision Derek Andrew, Inc. v. Poof Apparel Corp., 528 F.3d 696 (9th Cir. 2008), which held “in order to recover statutory damages, the copyrighted work must have been registered prior to commencement of the infringement, unless the registration is made within three months after first publication of the work,” the District Court rejected the claim for any statutory damages because the alleged infringement began more than three months before plaintiff obtained copyright registration.

Register.

Protect Software!!!!!!!!! Register Copyrights . . .

A prerequisite to bringing suit to enforce a copyright is that the copyrighted work is registered with the U.S. Copyright Office. 17 U.S.C. § 411(a). Let's repeat that: A prerequisite to bringing suit to enforce a copyright is that the copyrighted work is registered with the U.S. Copyright Office. 17 U.S.C. § 411(a).

Registering a copyright brings a horde of benefits to the copyright owner, including statutory damages, but the best benefit is attorneys' fees rights in enforcing the copyright. From a litigation perspective, the threat of an award of fees significantly shifts the balance of power to the copyright owner.

And the registration of copyrights must include registration of derivative works. "A 'derivative work' is a work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted. A work consisting of editorial revisions, annotations, elaborations, or other modifications which, as a whole, represent an original work of authorship, is a 'derivative work'." 17 U.S.C. § 101. "The copyright in a . . . derivative work extends only to the material contributed by the author of such work, as distinguished from the preexisting material employed in the work, and does not imply any exclusive right in the preexisting material." 17 U.S.C. § 103(b).

When software revisions are issued, those revisions are derivative works. The original software should be copyrighted and registered, as should be the revisions.

In Dalton-Ross Homes, Inc. v. Williams, 2007 WL 2461892 (D. Ariz. Aug. 29, 2007), the plaintiff sued claiming defendant had infringed a copyright which plaintiff held on architectural floor plans. Plaintiff had registered a copyright for a floor plan known as the “VDM plan” and claimed that a newer floor plan, known as the “Conley plan” was a derivative which was entitled to protection as well. The defendant had admittedly copied the Conley plan in designing a home. The court concluded as follows:

The registration requirement in § 411(a) makes no distinction between derivative and original works. Whether a separate registration of a derivative work is a prerequisite to an action for infringement of that derivative work is a question of first impression in this circuit. However, we are persuaded that separate registration of the derivative work is required. See Well-Made Toy Mfg. Corp. v. Goffa Int’l Corp., 354 F.3d 112, 115 (2d Cir.2003) (“registration of a claim on an original work does not create subject matter jurisdiction with respect to a suit for infringement of the original’s unregistered derivative”); Murray Hill, 264 F.3d at 632 (6th Cir.)(“before an infringement suit can be sustained based on the derivative work,that derivative work must be registered”); Montgomery v. Noga, 168 F.3d 1282, 1292 (11th Cir. 1999); Creations Unlimited, Inc. v. McCain, 112 F.3d 814, 816 (5th Cir.1997); cf. Litchfield, 736 F.2d at 1357 (“[t]o constitute a violation of section 106(2) the infringing work must incorporate in some form a portion of the copyrighted work”). These multi-circuit authorities,coupled with a plain reading of section 501(b) in conjunction with section 411(a), indicate that in order to file an action for infringement of a derivative work, the plaintiff must first register the copyright of that derivative work.

Register, register, register. And that applies to originals and derivative works.

Distribution Required????

Hotaling v. Church of Jesus Christ of Latter-Day Saints, 118 F.3d 199 (4th Cir. 1997)holds that a library distributed a work by adding it to the collection and listing it in the catalog, making the work available to the public. And distribution is the key to infringement in the RIAA cases. Other courts are reluctant to follow Hotaling's simplistic formulation, upping the ante in proof that must be offered by the RIAA.

In the view of some courts, Harper & Row, Publishers, Inc. v. Nation Enters., 471 U.S. 539 (1985), equates the term “distribute” with “publication”; and the Copyright Act in turn defines publication to include the “offering to distribute copies...to a group of persons for purposes of further distribution.”

Listing music files for downloading on a P2P network may not infringe the distribution right. London-Sire Records, Inc. v. Doe 1, 542 F. Supp. 2d 153 (D. Mass. 2008). And in Elektra Entertainment Group, Inc. v. Barker, 551 F. Supp. 2d 234 (S.D.N.Y. 2008), the Court held that “publication” has been given a broad interpretation, but all publications were not necessarily distributions. Merely “making [copyrighted works] available” did not violate the distribution right. Rather, plaintiffs would have to prove defendant “offer[ed] to distribute copies or phonorecords to a group of persons for purposes of further distribution.”

In Atlantic Recording Corp. v. Howell, 554 F. Supp. 2d 976 (D. Ariz. 2008), Judge Wake followed the approach of London-Sire and Perfect 10 v. Amazon.com, Inc., 508 F.3d 1146 (9th Cir. 2007). It deemed that “the great weight of authority that § 106(3) is not violated unless the defendant has actually distributed an unauthorized copy of the work to a member of the public. … Merely making an unauthorized copy of a copyrighted work available to the public does not violate a copyright holder’s exclusive right of distribution.”

We're waiting for appellate review on this issue.

Cab Old Magazines Can be Digitized Without the Author's Consent?

Should magazine publishers be allowed to republish their old works, even in a compilation, in digital form? The 11th Circuit said no; then it said yes. The defendant is the esteemed National Geographic Society. The plaintiff a poor photographer. Who has the rights to reproduce the photographer's work originally published in the National Geographic magazine?

Section 201(c) of the Copyright Act (dealing with ownership of contributions to collective works), which provides as follows:

Copyright in each separate contribution to a collective work is distinct from copyright in the collective work as a whole, and vests initially in the author of the contribution. In the absence of an express transfer of the copyright or of any rights under it, the owner of copyright in the collective work is presumed to have acquired only the privilege of reproducing and distributing the contribution as part of that particular collective work, any revision of that collective work, and any later collective work in the same series."

Well, that sounds like the deck is stacked in favor of the photographer, does it not? Section 201(c) was a big change in 1976: Prior to 1976, whenever freelance authors contributed to a collective work, they risked losing their copyright in their individual works absent a printed copyright notice in the author’s name. The presumption now is that the author retains the rights to copyright when his or her work in included in a collective work.

But, in the absence of the author expressly allowing future use, the publisher can still claim that the future work was a "later collective work in the same series." And that is what National Geographic asserted about its digital collection. What is the same and what is "new?"

The Supreme Court in the NY Times Photographer case, Tasini, held that the New York Times went beyond the Section 201(c) privilege by compiling the text of all its articles in a searchable online database. That database allowed users to view the individual articles out of context from the other material originally compiled and published as part of the daily newspapers. It ruled that the database constituted a new use rather than a republication or revision of the collective work and, hence, infringed the copyrights of the authors of the individual contributions.

What about the National Geographic digital use. National Geographic reproduced all of the contents of all of its issues, from the very first to the then most recent, including all of the articles and photographs, and even including the original ads, just as they appeared to readers in print form. So, "new" did not apply here. Decision: magazine.

Here is the distinction, provided in a footnote: "In Judge Anderson’s dissent, he gives the example of placing the March 2000 monthly 18 edition of National Geographic devoted entirely to the geography and natural beauty of Africa
into a larger book entitled “The Complete Intellectual History of Africa from 1900 to 2008” as an impermissible reproduction. Under this opinion’s reasoning, that reproduction and/or distribution would not survive the contextual analysis either and I would reach the same result."

http://www.intellectualpropertylawblog.com/greenberg%20v%20national%20geographic%20society.pdf

Register Those Copyrights!! But the Circuits Differ on When "Registration" Occurs

You are barred from filing a copyright lawsuit without a copyright registration. Statutory damages, meaning that the copyright owner does not have to prove damages, but receives a fixed amount ($750 to $28,000 per infringement) and a chance to double that for willfulness, are available with registration. But, that registration must be completed before the first infringement. Probably more important is the right to attorney's fees, which also requires registration.

It takes some number of months from the time of application until the U.S. Copyright Office issues a registration certificate. With an expedited registration, for which you pay more, the process takes weeks.

Courts have recently decided that the statute requiring "registration" means a registration that has been issued by the Copyright Office, rather than a mere application. But, a federal court in Illinois recently decided that the completed application, and not the Copyright Office issuance, satisfied this requirment.

One blog reports that five of the thirteen federal circuits have decisions holding that a completed application is sufficient to confer jurisdiction for filing a lawsuit. [First, Third, Fifth, Seventh, and Eighth Circuits. Foraste v. Brown Univ., 248 F. Supp. 2d 71, 77 n.10 (D.R.I 2003); Wilson v. Mr. Tee’s, 855 F. Supp. 679, 682-683 (D.N.J. 1994) and SportsMEDIA Tech, Corp. v. Upchurch, 839 F. Supp. 8, 9 (D. Del. 1993); Lakedreams v. Taylor, 932 F.2d 1103, 1108 (5th Cir. 1991); Chicago Bd. of Education v. Substance, Inc., 354 F.3d 624, 631 (7th Cir. 2003) and see Goss Int’l Ams., Inc. v. A-Am. Mach. & Assembly Co., 2007 U.S. Dist. LEXIS 88382, 2007 WL 4294744 (N.D. Ill. Nov. 30, 2007); Action Tapes, Inc. v. Mattson, 462 F.3d 1010, 1013 (8th Cir. 2006).]

The blog further reports that the Sixth, Tenth, and Eleventh Circuits follow the other approach and require the issuance of a registration. Hawaiian Village Computer, Inc. v. Print Management Partners, Inc., 501 F. Supp. 2d 951, 2007 U.S. Dist. LEXIS 7910, 2007 WL 431017 (E.D. Mich. 2007); La Resolana Architects, PA v. Clay Realtors Angel Fire, 416 F.3d 1195 (10th Cir. 2005); M.G.B Homes, Inc. v. Ameron Homes, Inc., 903 F.2d 1486, 1488 n.4 (11th Cir. 1990).

The Second, Fourth, Ninth, and DC Circuits have yet to issue an opinion, but their district courts have adopted contrasting approaches. Compare Capitol Records, Inc. v. wings Digital Corp., 218 F. Supp. 2d 280 (E.D.N.Y. 2002) (complete registration) with Well-Made Toy Mfg. Corp. v. Goffa Int’l Corp., 210 F. Supp. 2d 147 (E.D.N.Y. 2002) (complete application); Compare Mays & Assocs., Inc. v. Euler, 370 F. Supp. 2d 362 (D. Md. 2005) (application and registration have distinct meanings) with Iconbazaar, L.L.C. v. Am. Online, Inc., 308 F. Supp. 2d 630, 633 (M.D.N.C. 2004) (application approach); Compare Loree Rodkin Management Corp., 315 F. Supp. 2d 1053 (C.D. Cal. 2004) (certificate approach) with Tabra Inc. v. Treasures de Paradise Designs Inc., 20 U.S.P.Q.2d 1313 (N.D. Cal. 1992) (application approach); Compare Strategy Source Inc. v. Lee, 233 F. Supp. 2d 1 (D.D.C. 2002) (complete registration) with International Kitchen Exhaust Cleaning Ass’n v. Power Washers of N. Am., 81 F. Supp. 2d 70 (D.D.C. 2000) (application approach).

I found this research on Lexology, in an article by Alan J. Haus of Lewis Brisbois Bisgaard & Smith LLP. Thank you Alan; very nicely done.

"Imagine" This . . .

For fifteen seconds of the song Imagine, Yoko and Julian and Sean sued the producers of Expelled: No Intelligence Allowed. Infringement or fair use is the issue.

Fair use factors? The purpose and character of the use; the nature of the copyrighted work; the amount and substantiality of the portion used; and the effect on the potential market. Not a hard case: although the purpose was commercial, and the song is a core copyright work, not much was used and it did not effect the potential market.

The court agreed with the defendants that it was highly transformative. Rejecting the plaintiffs’ argument that the use was not transformative because the excerpt was played in the film without any alteration, the court held that the selection of the particular portion of the song was made for purposes of social commentary, namely, to criticize the song’s diminution of religion. This selection, and the juxtaposition with video also supporting this criticism, rendered the use transformative.

Transformative? Judge Pierre Leval developed the term in his article "Toward a Fair Use Standard," 103 Harv. L. Rev. 1111 (1990):

"The use must be productive and must employ the quoted matter in a different manner or for a different purpose from the original. A quotation of copyrighted material that merely repackages or republishes the original is unlikely to pass the test; in Justice Story's words, it would merely "supersede the objects" of the original. If, on the other hand, the secondary use adds value to the original -- if the quoted matter is used as raw material, transformed in the creation of new information, new aesthetics, new insights and understandings -- this is the very type of activity that the fair use doctrine intends to protect for the enrichment of society. Transformative uses may include criticizing the quoted work, exposing the character of the original author, proving a fact, or summarizing an idea argued in the original in order to defend or rebut it. They also may include parody, symbolism, aesthetic declarations, and innumerable other uses."

Judge Richard Posner, in the beany baby case, points out that "The defense of fair use, originally judge-made, now codified, plays an essential role in copyright law. Without it, any copying of copyrighted material would be a copyright infringement." Note that how good was Ben Stein in the movie matters not at all. As Judge Posner explains, "But the fair-use doctrine is not intended to set up the courts as judges of the quality of expressive works. See Campbell v. Acuff-Rose Music, Inc., supra, 510 U.S. at 582-83, 114 S.Ct. 1164. That would be an unreasonable burden to place on judges, as well as raising a First Amendment question."

What matters is that the first part of the four factors is not just about being commercial or non-commercial, but about the use. In the big case, the Supreme Court said that if the work "adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message," then it can be protected as fair use. "The goal of copyright, to promote science and the arts, is generally furthered by the creation of transformative works." Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 579, 114 S.Ct. 1164, 1171 (U.S.,1994)

Statutory Damages . . . . Register!!!!!

The Ninth Circuit, in Derek Andrew, Inc. v. Poof Apparel Corporation , falls in step with the rule that for any statutory damages, copyright registration must precede infringement.

In a clothing case, the alleged infringement began prior to the copyright registration date of plaintiff's "hang-tag", but continued after the copyright registration date. Section 412 of the Act mandates that in order to recover statutory damages, the copyrighted work must have been registered prior to commencement of the infringement, unless the registration is made within three months after first publication of the work.

The plaintiff did not register until two years after the first publication of its work, and the initial infringement occurred prior to the registration of the infringed work. But,individual acts of infringement occurred after the copyright registration date.

The Ninth Circuit explained that it would be peculiar to use the word "commenced" to describe a single act of infringement, rather than an activity beginning at one time and continuing or reoccurring thereafter. The Ninth Circuit held that the first act of infringement in a series of ongoing infringements of the same kind marks the "commencement" of one continuing infringement under Section 412. This decision is consistent with other circuits (2nd Circuit, 4th Circuit, and 5th Circuit) that have previously addressed this issue.

Judge Wake Surprises -- Holds Back RIAA for the Moment

Judge Wake surprises. That is, he suprises me, at least. This is not surprising in the sense that Federal Court judges face imposing very terrible fines on individuals for copyright infringement in file sharing, and he statute provides little room for them to show any mercy.

How did he surprise? By taking on the difficult issue of proving infringement through deemed distribution. Some background first.

Copyright infringement requires actual distribution of the copryighted work. As Judge Wake notes, "[t]he general rule, supported by the great weight of authority, is that 'infringement of [the distribution right] requires an actual dissemination of either copies or phonorecords.' Nat’l Car Rental Sys. v. Computer Assocs. Int’l, Inc., 991 F.2d 426, 434 (8th Cir. 1993). See also Perfect 10, Inc. v. Amazon.com, Inc., 487 F.3d 701, 718 (9th Cir. 2007)" The buzz has been around the Fourth Circuit's library case, Hotaling, where, by placing the copyright works for use by the public was enough to prove distribution because they failed to keep records. The record companies wanted to analogize the library to a shared file on one's computer.

The crafty Judge Wake said no, though. Judge Wake noted that the Ninth Circuit, in Perfect10, agreed with the district court’s conclusion that distribution requires an "actual dissemination," consistent with the language of the Copyright Act. Judge Wake says the Ninth Circuit rejects Hotaling. Judge Wake emphasizes that Hotaling is inconsistent with the Copyright Act.

Further, Judge Wake discards the argument that an offer to distribute are not sufficient to meet the distribution requirement. Judge Wake says that "[t]he scope of the term distribution is only defined within § 106(3) itself, as a “sale or other transfer of ownership” or a “rental, lease, or lending” of a copy of the work. The plain meaning of that section requires an identifiable copy of the work to change hands in one of the prescribed ways for there to be a distribution." The record companies argued that the word "distribution" would be equated with "publication."

So? There were 54 copyrighted tunes in the Defendant's shared folder. The Plaintiffs downloaded only 12. The Court allowed these 12 as an investigative scheme. The Defendant has other defenses, but damages have been reduced from 54 times the minimum amount ($750) to 12 times that amount.

Good (or lucky) Drafting Wins: “Now or Hereafter Known”

Joey Ramone sued Walmart and Real Network over downloading songs he wrote. The problem? Mr Ramone had a recording agreement with Ramones Productions who licensed the works. Mr Ramone had authorized Ramones productions to use the works and exploit them in “forms of reproduction” which were “now or hereafter known.” The Court said that covered digital forms and was the most reasonable reading of the agreement. Sorry Joey. Punked. I should say Joey's estate: Joey died in 2001.

RIAA Sues Project Playlist

As one attorney said, "another day, another RIAA lawsuit." What is different about this one?

Project Playlist gives users the opportunity to find, play and share music with others for free, as well as allowing them to embed personalised playlists on their social networking homepages on sites such as MySpace and Facebook, according to the lawsuit. It's "Terms of Service" states:

Project Playlist is an information location tool and social networking website that provides users with an integrated set of services to (i) enable users to locate music files hosted on websites controlled by third parties for promotional or other legal purposes, (ii) stream those legally posted music files using the Project Playlist music player (the “Player”) so the music can be heard, (iii) create hyperlinks to legally posted music files discovered by the user and add those hyperlinks to the Project Playlist search index, (iv) create and publish a series of such hyperlinks to form playlists on a member’s webpage, (v) share those playlists with friends and browse other members playlists on other members’ web pages by embedding the Player in other webpages, where permitted, (vi) purchase music found using the Project Playlist search engine or browsing other members playlists, (vii) obtain current information about new song releases from music blogs, (viii) obtain current information on the popularity of songs as measured by frequency of appearance on other members’ playlists, and (ix) network with other members through a variety of social networking and communications tools.

The record companies claim that: "In short [Project Playlist's] entire business amounts to nothing more than a massive infringement."

What does Project Playlist say about copyright?

Project Playlist is an information location tool intended to help you find and enjoy music legally posted by others on the Internet. Project Playlist intends to organize in its search index location information about music posted on the Internet for promotional and other legal purposes to serve artists and their fans. Project Playlist is also committed to respecting the legitimate interests of copyright owners. Therefore, where possible, Project Playlist negotiates reasonable copyright licenses that also respect the public’s legitimate interest in gaining access to public information and preserving the freedom and functionality of the Internet. Project Playlist pays performance royalties to ASCAP, BMI and SESAC, the three performance rights organizations (“PSOs”) based in the Untied States.

It appears that Project Playlist is used, like a VCR, for legitimate non-infringment purposes and purports to pay royalties. Stay tuned.

Fairly Harry Potter

A lexicon presents the language of a field or area. The "HP Lexicon" began as a website where contributors collected information about people, places, and things that inhabit the Harry Potter universe. Those who care about these things Harry Potter regard it as the most complete and authoritative guide to the world of Harry Potter, and it attracts upwards of 25 million visitors per year. The HP Lexicon’s editor decided to publish the HP Lexicon in book form, and RDR Books agreed to do so. Ms J.K. Rowling and Warner Brothers filed suit against RDR, alleging claims for copyright and trademark infringement, and seeking to stop publication of the book.

The issue is fair use, the most misunderstood area of copyright law. Judge Posner has noted that "copying that is complementary to the copyrighted work (in the sense that nails are complements of hammers) is fair use, but copying that is a substitute for the copyrighted work (in the sense that nails are substitutes for pegs or screws), or for derivative works from the copyrighted work . . . is not fair use." Ty Inc. v. Publications International, 292 F.3d 512 (7th Cir. 2002). His economic approach is not really codified in the law, but it does focus on the core concept: is the new work a substitute for the copied work. Following Judge Posner's logic, the Lexicon seems to complement rather than replace Ms Rowling's works, and to do her no harm.

But first, fair use. Judge Posner aptly points out that the statute confuses rather than helps. It says that "the fair use of a copyrighted work... for purposes such as criticism, comment, news reporting, teaching ... scholarship or research, is not an infringement of copyright." 17 U.S.C. § 107. In deciding whether a particular use is fair, the "factors to be considered shall include(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work." This is a list, not a test. So, what is the judge in the Harry Potter case to do?

That is easy enough -- right. Often courts confuse the "sweat of the brow" as the source of copryightable material. It is not. It is just the originality and expression, no matter how difficult or easy the effort, that is protected. The real issue for Ms Rowling is whether the Lexicon infringes her rights to develop derivative works. The Copyright code defines a derivative work as "a work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted." 17 U.S.C. § 101. Does producing a Lexicon in book form compete with the rights of Ms Rowling and her empire to produce her own Lexicon as a derivative work? Yes; but is a Lexicon a derivative work? That is, does it recast, transform, or adapt the work?